Property holdout forces changes to McFarland bioenergy project

Jul. 29—The developer of a biomass-to-energy project in McFarland is considering reworking what could be the first of its kind after an owner of mineral rights under the proposed site balked at the company's purchase offer.

Since learning of the objections by rightsholder Lloyd Snell, CEO Jerod Smeenk said, Iowa-based technology company Frontline BioEnergy has begun exploring "numerous options," including possibly piping byproduct carbon dioxide to a different property for injection deep underground.

The situation illustrates complications that surround fledgling efforts to address climate change while at the same time producing transportation fuel and reducing open burning of local ag waste. A state bill that would have changed rules on rights of access to underground storage at properties like Snell's was recently watered down by substantial amendments.

Snell, an engineer living in Turlock, said Frontline offered to pay him $250 per acre, for a little more than 19 acres, in exchange for mineral rights under or near 80 acres the company arranged to purchase from the city of McFarland for construction of a biomass gasification operation. The former alfalfa field site once served the city's municipal wastewater treatment system.

His property may not be suitable for oil and gas production, Snell said, but he's unwilling to let it go at the offered price because he thinks it's worth more than that as a final destination for large amounts of carbon.

"I said, 'What a minute. You want a gigaton storage tank. There's value for that,'" he said. He added a company representative told him the proposed transaction could be affected by the outcome of the legislation, Senate Bill 1101.

Frontline, doing business locally as San Joaquin Renewables LLC, is in the middle of engineering the project it says will employ 400 workers during construction plus 50 to 60 people permanently upon launch in 2025.

The idea is to gasify — that is, super-heat but not combust — about 300,000 tons per year of nut shells and other waste at the site in a net carbon-negative process expected to reduce the need for open burning. By his estimate, the operation will produce almost 3.5 billion megajoules of energy per year in the form of methane for use as truck fuel instead of diesel.

The operation would also generate biochar, a potentially marketable product that can be used as a soil amendment, plus 400,000 tons per year of CO2.

Smeenk said Thursday Snell's refusal would not affect how much gas the project produces but it could affect where, and whether, the company goes ahead with underground storage of CO2.

He added it was unclear if changes to the text of SB 1101 would impact the project, and noted various legislation is pending that could affect projects like Frontline's.

"What I can say is that part of what we're evaluating is how we might go about doing carbon sequestration at that site," the CEO said. "We're evaluating our options and we have numerous options on the table for how we can proceed at the project."

McFarland Assistant City Manager Peter Cosentini said the city had not been unaware of the mineral rights-related complication. It hopes a resolution can be reached, he said, "but it's between them," referring to Frontline and Snell.

He noted permitting work on the project remains to be done with regard to rezoning, site plan review and an environmental assessment.

"Any final decisions that the company makes on this will come before the city ... and we'll have an opportunity to evaluate them," Cosentini said, adding the project is an interesting part of the city's wider plans to expand its economic base.

"I think it's a great opportunity," he said.

State officials also have expressed interest in projects like Frontline's. The California Air Resources Board, trying to phase out ag burning within the next three years, has studied the potential for converting biomass into biofuel. It has discussed cooperating with other agencies to promote the activity and to pursue financial support from state and federal government.

SB 1101, introduced in February by state Sen. Anna Caballero, D-Merced, originally proposed an ambitious program for leading development of commercial use of carbon capture and storage technology and equipment. The legislation also attempted to clarify property ownership issues in cases of split ownership of surface land and underlying mineral rights.

Prior to major amendments, the bill would have revised the definition of "free space" within existing property rights law to include pore space that can be owned and used for storing gases or liquids, according to a legislative analysis. The bill also called for reducing fossil fuel production in California.

Caballero said in an earlier statement CCU offers not just climate benefits but employment for workers displaced during the transition to cleaner energy. She noted the bill as initially presented would have created an administrative framework at the California Air Resources Board in support of carbon capture and storage projects.

"Additionally, this bill will establish a clear legal framework for pore space ownership, which is critical to support successful deployment of carbon capture, utilization and sequestration in California," the senator wrote.

But following repeated changes, the bill as now written aims much more modestly to establish an expert advisory board merely to advise CARB on such projects.

A representative of the senator did not respond to a request for comment on the bill's revisions.